Why Lake Street Capital Likes Ballard Power Systems

Lake Street Capital Markets recently upgraded Ballard Power Systems Inc. (USA) BLDP from Hold to Buy and established a $4 price target.

Analyst Robert D. Brown felt the company had “demonstrated good execution of its strategy with the strong monetization of its UTC patent portfolio.”

Brown also looked forward to the company ramping up its telecom and material handling business during 2015, which may give investors more confidence in the stock, he said.

Ballard made a “substantial improvement” during the past few years, according to Brown, having turned its focus to “commercial markets, cost-effectively positioning for long-term development markets, and deriving value from its broad IP through licensing and services contracts.”

One of the areas where the company derived value from its intellectual property was in a sale to VW Group of its auto-related fuel cell patents for $50 million in cash.

Additionally, the company will receive revenue through 2018 of approximately $15-$20 million for engineering services related to the deal.

Brown added that Ballard retained rights to the fuel-cell patents for other applications, and expected "the company to continue to use this IP on its development stage businesses including the bus, telecom, and other markets.”

The firm’s $4 price target was based on $2.53 per share for the core business, plus $1.41 per share for the development stage business.

Ballard Power Systems Inc. (USA) recently traded at $2.66, down 8.90 percent.